Nothing can transcend reality; not even the highest forms of diplomacy and statesmanship. And today, the inescapable truth is that both India and Japan are natural partners much beyond the pale of even the so-called strategic partnership. Both countries could ensure peace and stability in the Asia-Pacific region by ushering in a renewed balance of power. The undisputed fact is that despite India’s great efforts, Chinese influence has increased in India’s neighbouring areas. Most neighbours have realised that they can immensely benefit from the relentless Chinese policy of ‘string of pearls’ and have consequently started to exploit the situation.

China has managed to increase its presence through ‘cheque book diplomacy’ and has really compelled India to reinvent and revamp its traditional diplomacy of Panchsheel and intensify the process of geopolitical pragmatism. Similarly, China has become very aggressive by imposing the controversial “Air Defence Identification Zone” over the East China Sea from November 23, 2013, demanding that all foreign aircraft flying through it should obey Chinese air-traffic controllers’ instructions. Tensions between Japan and China have considerably escalated over disputed islands in the East China Sea. Both claim territorial rights over the islands known as Senkaku in Japan and Diaoyu in China. India has to respond to China’s blatantly dictatorial tendencies and support Japan’s position in its current territorial dispute with China in the East China Sea, by underscoring the importance of freedom of flight, freedom of navigation and respect for international laws for peaceful dispute resolution. Japan needs to rethink its own strategy to counterbalance Chinese aggression in the region by establishing a civil nuclear deal with India and reinterpreting its largely anachronistic stance on the Comprehensive Nuclear-Test-Ban Treaty (CTBT) and the Non-Proliferation Treaty (NPT), given India’s excellent non-proliferation record and similar deals signed with other major powers like U.S., Canada, France, South Korea etc.

Ultimately, India and Japan have begun to realize their mutually shared potential, opportunities and strategic complementarity to combat the imminent challenges related to their growth and security. Any nation cannot remain safe until a specific growth rate is maintained and a strategic position is sustained. Japan’s Prime Minister Shinzo Abe has correctly stressed the need for cooperation with India and said that the two countries together “can do wonders” and “It is not that only India requires Japan, Japan too requires India”. Undoubtedly, both India and Japan share “universal values and strategic interests”. While India requires Japanese technology and investment, Japan requires India’s skilled and trained human resources. India has described Japan as the “heart” of India’s ‘Look East’ policy and a “key partner” in economic development.

South Korean President Park Geun-hye, the country’s first woman president, visited India and imparted new dynamism to the Indo-South Korean relations. This has further strengthened India’s ‘Look East’ policy. The growing inclination of China towards North Korea has disenchanted South Korea and this has changed the strategic equations in the Asia-Pacific region. It is to be noted that South Korea has become China’s largest trading partner in the region. The neighbouring states in the Asia Pacific region are also trying to look for alternative equations. Further, the growing rift between China and the ASEAN countries have given enough room for India to play a proactive role in ensuring balance of power in the region. It can be said that India has enormous opportunity to become active in the fluid situation of the Asia Pacific region.

Abe has been strongly advocating the enhanced role for India in establishing a strong defence mechanism to meet the hostile conditions. In his book ‘Towards a Beautiful Country: My Vision for Japan’, published in 2007, he had highlighted the proposition that Indo-Japanese relations have the potential to surpass Japan’s ties with the US. A quadrilateral security arrangement involving Japan, the US, Australia and India did not take off after a strong demarche issued by China, seeking such an arrangement’s intention. Abe had presented his vision of a “Democratic Security Diamond”, which envisages “a strategy whereby Australia, India, Japan, and the US state of Hawaii form a diamond to safeguard the maritime commons stretching from the Indian Ocean to the Western Pacific. Japan has acknowledged that India’s position, owing to its strategic geographical location in Asia, is “important for Japan” not only for its maritime interests but for its overall security as well.

Both India and Japan have signed eight pacts, of which half were connected to Japanese aid, indicating that soft loans and outright grants will continue to remain an integral component of Japan’s strategy of reaching out to India. Abe held out the promise of more aid, of which 70 per cent will go for phase III of the Delhi Metro project. India needs huge investments to beef up its crumbling and overburdened infrastructure. It has been estimated that India needs US $1 trillion in investments in infrastructure to sustain the growing population. Japan has granted India $2.32 billion during 2013 in aid for infrastructure projects and agreed to loan a further $753 million to help fund a metro system in Mumbai. In a significant move, India has decided to invite Japan to invest in and build overland infrastructure in the politically sensitive north-eastern states of India. Japanese companies will have the opportunity to help the development of the North East in roads, agriculture, forestry, water supply and sewage facilities.

Japanese assistance for Chennai port is also aimed at giving teeth to a new sea-based route that would start in Chennai, and end in Dawei port in Myanmar’s Tanintharyi region. The port is being developed by Thailand. In 2012, Thailand had promised to pump in a massive $50 billion into Dawei, making it a bigger investment than China’s in Gwadar or Hambantota. The development of a new port in Chennai would serve to connect the industrial centres of southern and western India with Southeast Asia. In addition, Japan’s investment in the Bangalore-Chennai industrial corridor would find an easy outlet from Chennai. In Sri Lanka, where India is working hard to squander its hard-won gains, it has invited Japan to help develop a huge thermal power plant in Trincomalee. Foreign Minister Salman Khurshid has recently inaugurated the project, which India has promised would be a better, cheaper power project than the one developed by the Chinese in Norachcholai. India and Japan could also jointly develop the strategically crucial oil terminals in Trincomalee. As part of the trilateral dialogue between India, US and Japan, a trilateral highway linking India, Myanmar and Thailand (the ambitious draw it further to Hanoi, Vietnam) is likely to see more Japanese and US interest. This is an India-led project due for completion in 2016, but by itself, India is unlikely to make the target.

The bilateral currency swap arrangement has been expanded from $15 to $50 billion; the Japanese official development assistance of over 200 billion yen was negotiated. India is the biggest receiver of Japan’s ODA and Indian companies are also the second-biggest receivers of assistance from Japan Bank for International Cooperation (JBIC) after their Chinese counterparts. The two sides agreed that all instruments of funding of the JBIC and the Japan International Cooperation Agency (JICA), including the Special Term for Economic Partnership (STEP), should be explored on mutually beneficial terms. According to JICA, Japanese cumulative commitment of ODA loans to India stood at 3,781 billion Japanese Yen (Rs.2,29,100 crore approximately) as of March 2013. JICA has signed around 230 ODA loan agreements with India in various fields ranging from road, metro projects, water supply and sanitation, environment conservation, power and several other infrastructure sectors.

In the energy space, the government-controlled largest power generator NTPC Ltd. also signed an agreement for two loans totalling to $430 million (Rs 2,650 crore) for its Kudgi and Auraiya projects. Besides, the Japanese are also financing a scheme for two smart community projects, the model project for micro-grid system using large scale PV power generation at Neemrana and the Sea Water Desalination project at Dahej. India and Japan, two of the world’s biggest buyers of liquefied natural gas (LNG), may this month sign an agreement to look at jointly procuring LNG so as to cut prices for the fuel. India, the seventh-largest LNG buyer in the world, and Japan, the biggest importer of liquid gas, currently buy the gas separately.

To promote people-to-people contacts, Japan also announced short-term multiple entry visas for Indians to promote educational and academia exchanges. Japan also lowered non-tariff barriers to import of shrimps that will help Indian fishermen. Japan agreed to lend $113 million for reconstruction work in Uttarakhand devastated by floods last year. It also donated $14.6 million to a children’s hospital in southern India. The countries signed another agreement for promoting tourism.

India and Japan have vowed to expedite talks for a civil nuclear agreement, while agreeing to increase bilateral trade in goods and services under the comprehensive economic partnership agreement (CEPA). Formal negotiations for a civil nuclear deal with Japan started in Tokyo in June 2010; these were followed by two consecutive rounds in October 2010 (Delhi) and November 2010 (Tokyo). However, India slowed the pace of negotiations in the wake of the Fukushima nuclear accident in March 2011. The last round of talks was held in November 2013.

In a major initiative, Japan has set up a National Security Council for the first time in its history, and both countries have decided to hold politico-security consultations on a regular basis with India’s National Security Advisor, besides stepping up the pace of meetings between the Defence Ministers. Japan has also given priority to three important consultations in the security arena after the change of guard - dialogue between India, Japan and the U.S., defence policy dialogue and two-plus-two talks, a unique forum for India involving the Defence and Foreign Secretaries of both countries.

The frequent incursions by Chinese forces into India has indicated growing potential of China’s threats from land, whereas Japan sees threats in the maritime arena. To fill these gaps, the first step would be to conclude the General Security of Military Information Agreement (GSOMIA), to correctly assess the changing strategic landscape in East Asia and deepen understanding of each side’s threat perception. After successfully conducted joint naval exercises between the Indian Navy and the Japan Maritime Self-Defence Force (JMSDF) in December 2013 off the coast of Chennai, both countries have decided to conduct similar exercises in the Pacific Ocean this year. India has also invited JMSDF to take part in the Malabar maritime exercises. Besides that, India is set to become the first country since World War II to buy a military aircraft from Japan, helping Prime Minister Shinzo Abe end a ban on weapons exports that has kept his country’s defence contractors out of foreign markets. The two countries are in broad agreement on a deal for the ShinMaywa Industries US-2 amphibious aircraft, which could amount to as much as $1.65 billion. India is likely to buy at least 15 of the planes, which are priced at about $110 million each. The plane has a range of over 4,500 km (2,800 miles), which will give it reach far into Southeast Asia from the base where the aircraft are likely to be located, in the Andaman and Nicobar island chain that is near the western tip of Indonesia. Japanese Defence Minister Itsunori Onodera had visited India to discuss, among other issues, the purchase of Utility Seaplane Mark 2 (US-2) amphibious aircraft for Indian navy. Like the C-17 Globemaster III, which lands vast payloads on high-altitude dirt runways, the Utility Seaplane Mark 2 has been preferred by the Indian military for the unprecedented options it provides. Some 20 countries want to buy the US-2, but Article 9 of Japan’s Constitution holds it back from warlike activities, including the export of military equipment.

On the civil nuclear agreement, the visiting leader said both sides have agreed to continue talks for an “early conclusion of the agreement”. In a positive development, the New Komeito Party - part of Japan’s ruling coalition which had differences with the Liberal Democratic Party of the Prime Minister - has expressed support for a civilian nuclear cooperation between Japan and India and called for a “flexible approach” to move forward on negotiations on the proposed agreement.

But in this world of globalization, the concept of strategic and natural partners are to be determined on the basis of economic relations and not merely on the basis of political equations and imperatives. In this regard, both countries lack enormously to sacrifice to build a strong economic relations. The major obstacles are:

There are several tariff as well as non-tariff barriers on export items of India’s interest - primarily agricultural items and services - which make it difficult for these items to penetrate the Japanese market.

Many sub-sectors such as oilseeds, dairy products, sugar and sugar products are subject to tariff peaks, that is, tariffs three times as high as the average.

Japan’s tariff rate quotas - specified zero-tariff quotas for different commodities - for Indian goods cover only 1.7 per cent of the entire trade basket.

The innumerable non-tariff barriers that pose a real threat to unobstructed trade with Japan.

In terms of standards and technical regulations, Indian goods often find it difficult to meet the requirements of the technologically slick Japanese certification authorities, which are fast aligning with international standards.

Japan has refused to import sesame seeds from India since it had allegedly detected DDT residue in some lots in the early 1990s.

Many of Japan’s sanitary and phytosanitary requirements go beyond even international standards. Imported agricultural products, for instance, have to undergo a dual inspection and quarantine system, first under the Japanese Ministry of Agriculture, Forestry and Fisheries and then under the Health Ministry.

Chemical imports too have to meet strict approval requirements while textile and leather products face problems if they have been treated with certain kinds of chemicals.

Being a comprehensive trade agreement in goods, services and investment, the FTA provides good opportunities for India in terms of service exports.

In this, computer-related and IT services are of particular interest to India. However, a 15 per cent withholding tax levied by Japanese authorities is a major hurdle discouraging Indian professionals from working in Japan.

Indians can get only a three-year multiple-entry visa at most, that too if they are invited by their Japanese counterpart. India must intensify its tax reforms. India’s tax system, characterised by multiplicity of taxes charged by the Centre and the States and the differential tax regimes, has deterred FDI from Japan; administrative bottlenecks further confound this confusion, with the web of “needless” bureaucratic procedures serving to depress Japanese sentiments on investments into India. The second-generation economic reforms are still underway, even after more than two decades, and the legal system is still not defined.

Both sides must realise that China is now too big to be ignored from both economic and military point of view. China also knows this reality. And history tells that any powerful country when it feels that it is powerful enough to start dictating terms to others, only then is the peace jeopardised. And this jeopardy can be reversed only when the underlying feeling of superiority is mitigated. Therefore, the balance of power should not be disturbed at any cost. In this regard, India and Japan are natural partners and they should build a balanced and all-weather relationship ranging from nuclear to technological spheres. Anything less wouldn’t do, not even diplomacy.

Lastly, India must realize that the era of ‘Big Brother’ foreign policies is well and truly over. India’s neighbours are very well aware of the potential benefits of simultaneously negotiating with both India and China. They have become adept in using one against the other as an effective bargaining chip to extract maximum benefits from both nations. China’s economic and military might and India’s unblemished record of democracy and regard for international laws provides them perfectly aligned issue-based allies to fulfil a wide variety of domestic, regional and international goals of a social, political or economic nature.

Therefore, India must reduce its expectations from neighbours and increase its focus and vigilance on their activities. Value-based foreign relations are not cutting ice any longer in an increasingly materialistic and globalized socioeconomic order that decides political and military might in the 21st century, and hence, effectiveness of foreign policy.

Accordingly, India must restore the progressively distorting power equations gravitating towards the economic powerhouse of China in the Asia Pacific region by reorienting its ‘Look East’ policy and making Japan its fulcrum and linchpin. India’s geopolitical heft and Japan’s technological and financial muscle can prove an effective counterbalance to China to ensure peace, prosperity and freedom in the Asia-Pacific without resorting to another round of an expensive arms race that will steal from productive and socially beneficial investments for the majority of the global population that still witnesses poverty, disease and hunger on a recurring basis.